Independent Schools Queensland yesterday released a report it commissioned from AEC Group on the economic contribution of its 190 member schools (i.e. non-Catholic private schools) to Queensland, revealing a direct contribution of over 14,000 jobs and $1.8 billion in gross state product (0.6% of total GSP). As is usual in economic contribution studies, much is made of the estimated indirect impacts, production and consumption-induced economic activity (see figure above), but as the calculation of these impacts is controversial and the usefulness of the estimates (particularly the consumption-induced impacts) is debatable, I will refrain from getting too excited about them.
In my view, the really interesting aspect of the study is the estimated savings to taxpayers from independent schools. While private schools receive some public funding, largely from the Commonwealth Government, as you would expect, it is much less per student than funding to state schools, implying a saving to taxpayers when students move from state to private schools. The report notes:
Independent schools are estimated to have saved tax payers a total of $1.02 billion in 2013-14, through a combination of savings of $804 million in recurrent education costs and $218 million in capital costs.
This raises in my mind the messy and sub-optimal funding arrangements we currently have for schooling in Australia, involving a mixture of grants for different purposes from State and Federal Governments. Ideally, we would have some sort of means-tested voucher for schooling, so government funding per student is not affected by the choice of school, and to promote greater competition among all schools, with efficiency gains likely flowing from that. This would require substantial Commonwealth-State cooperation to implement and hence is very unlikely to ever occur.
I recall that, last year, at least one courageous public servant from the Queensland Department of Premier and Cabinet tried to get the State Government to consider school funding reform, raising the idea of co-payments for state schools, but alas that effort was not well received by the Government (see Qld Government denies plan for public school fees).
For more on school funding, see my previous posts:
Catholic schools still benefiting from very favourable funding deal from Howard Govt days
Queensland Economy Watch 
An excellent summary of the issues with the funding of schools by governments around Australia, thank you, Gene.
On my count, there are at least ten different “messy and sub-optimal funding arrangements” that constitute the federal government’s response to the Gonski report, none of which comes close to an efficient and fair arrangement. In addition, the various states’ funding arrangements further complicate the operation of schools in all three school sectors – public, Roman Catholic and independent.
The result is that a needs-based national funding arrangement for school education, that is (a) efficient (b) equitable (c) sector-neutral and (d) affordable for taxpayers, is even further away than before the Gonski review commenced.
The Qld independent school sector’s $1 billion annual contribution to taxpayer saving suggests that the parents of independent school students are carrying more than their fair share of the load.
Let’s encourage politicians of all parties in national and state legislatures to start thinking about the longer term benefits of forming a national funding structure that meets these four criteria?
Imagine the resulting economic gain, and the opportunities for so many young Australians to escape the poverty cycle, if we got this right?
Absolutely, Michael. Good point about the number of different funding arrangements. Thanks for the comment.
Gene
Great post and one to get the masses talking I’m sure. A few points here….
The contribution estimates attributable to the independent schools sector are actually of little value to the policy debate as education consumption is not discretionary. Only the funding source of the consumption is different, and additional expenditure by residents on private schools just crowds out expenditure elsewhere in the economy. So, with the exception of any export income generated from international students, contribution arguments just rule silly policy arguments.
At university we all learned about ‘human capital’ and that enhancing human capital was a major driver of economic growth, development and social wellbeing. A world-class school education system is an investment in the human capital of the nation (and with much higher social returns than tertiary education). Parents sending their kids to private schools are proactively making an investment in human capital over and above the government investment paid for through their taxes. This is presumably because the education their kids would receive in the private sector is assumed to be better.
Governments encourage private investment in built and land capital via tax breaks etc., often to a point that the investment is both cashflow neutral and the tax impost is negligible. But governments actually penalise private investment in human capital through the funding formulas. The basic relationship is that for every dollar of private investment in human capital through the school system, governments reduce funding 30-40c. I am not aware of any other investment class that is effectively taxed at 30-40%, particularly at the time of investment. Imagine the outcry if the state increased stamp duty on investment properties up to 40%.
So we seem to have education funding and tax systems that both place a handbrake on private investment in human capital of the next generation, and overtly encourage investment into asset classes (e.g. existing houses and shares) that contribute little to development. That doesn’t sound too edgy or innovative to me!
Excellent observation on the tax treatment of private investment in schooling, Jim. Thanks.
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